Microsoft has said that it is facing a bill of more than $1bn to cover the cost of offering extended warranties, after failings with its Xbox 360
The company admitted it had been forced to make "an unacceptable number of repairs" to the consoles after key hardware failed.
Customers who suffer the problems will now be given a free three-year warranty, the company said.
The failures are indicated by three red flashing lights on the console.
Microsoft has not revealed how many of its machines have suffered the problem, but said the number was "bigger than we are comfortable with."
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